Bayer AG raised its offer to buy Monsanto Co. and create a new global leader in seeds and pesticides, though the German firm said the higher price depended on achieving a “negotiated transaction.”
“Both sides are gradually nearing consensus,” one person familiar with the matter said.
Monsanto has also agreed to open its books for Bayer to conduct due diligence checks on the company’s business, two sources close to the matter said.
Bayer’s previous offer was already the largest all-cash takeover bid on record with a deal with Monsanto aimed at giving the German company a shot at grabbing the top spot in the fast-consolidating farm supplies industry, combining its crop science business with Monsanto’s strength in seeds. Bayer now says it is prepared to offer $127.50 per share in a negotiated deal, up from its previous offer of $125 per share.
Werner Baumann, who took over as Bayer’s chief executive just weeks before launching what would be the aspirin maker’s biggest-ever acquisition, is pursuing the deal as rivals in the $100 billion global market for seeds and pesticides seal their own mergers. Mr. Baumann has faced pushback from some Bayer shareholders, however, who have worried about Bayer shifting focus away from its pharma division.
Monsanto has said it sees the virtues of combining its prowess in seeds with Bayer’s much broader range of pesticides, but Monsanto’s board in July unanimously rejected Bayer’s previous offer of $125 a share as too low and “insufficient to ensure deal certainty.” Analysts have said around $135 to $140 a share may be a more realistic price.
Bayer was still considering all options regarding Monsanto, including striking a friendly deal, making a hostile bid or pulling its offer, a person familiar with the matter told Reuters.
Farming groups have raised concerns that such mergers could lead to fewer choices and higher prices. Insiders said that although the two companies were close to reaching an agreement on price, they had yet to agree on a strategy on how to deal with potential regulatory hurdles.
Shares in Bayer have fallen by close to a fifth this year and ended at €94.24 on Monday, valuing the company at €78bn.
Monsanto has risen 9% since the start of the year and closed on Friday at $107.44, making it worth just over $47bn. Wall Street was closed on Monday for the Labor Day holiday.